Question

Create a cash flow diagram for the following scenario by entering the letter denoting the correct location of the corresponding parameter in the cash flow diagram. For example, A would be the location of a positive cash flow at time O. An investor makes an initial investment of $4000 at time 0, with an interest rate of 3% per year. The investor intends to withdraw $1000 after three years, and $2000 after another three years. AB CD M N OP Q R
0 0
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Answer #1
A B C D E F G H I J K
2
3 a)
4
5 The cash invested is the cash outflow whereas cash withdrawn is the cash inflow.
6
7 Thus the cash flow diagram for the investor will be as follows:
8
9 Year 0 1 2 3 4 5 6
10 Cash Flow ($4,000) $1,000 $3,000
11 Letter denoting the correct location L D G
12
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